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SOC357H1 (10)

SOC357H1The Easterland Effect.docx

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University of Toronto St. George
Bonnie Erickson

The Easterland Effect (Pampel and Peppers) - The easterland effect posits cyclical changes in demographic and social behavior as the result of fluctuations in birth rates and cohort size during post-world war II period - Large cohort size reduces the economic opportunities - Lower relative economic status in turn leads to lower fertility, higher rates of female labour force participation, later marriage, higher divorce and illegitimacy and increasing homicide, suicide and alienation - Cycles in birth rates and cohort size suggest that the small baby bust cohorts entering adulthood in the 1990s will enjoy higher relative income, more traditional family structures and lower levels of social disorganization Review of the Theory - The expected standard of living of adults comes from their childhood economic socialization: the standard of living that persons become accustomed to during childhood creates aspirations against which they compare their income potential during young adulthood - Income earning possibilities stem from labour market experience - The higher one’s income potential is relative to expected standard of living, the higher one’s relative economic status - Demographic behavior, economic decision making and social wellbeing thus result from an individual’s or couple’s comparison of resources to aspirations - Cohort size represents the key determinant of both income potential and expected standard of living. Income potential depends on the size of cohorts and entering the labour force, while the expected standard of living depends on the size of cohorts of the previous generation - All else equal, the larger the cohort, the lower the potential income of members - A large youth cohort relative to the parental cohort results in relatively low income; a small youth cohort relative to the parental cohort results in high relative income - economic and social fortunes tend to vary inversely with relative cohort size because large cohorts face problems of crowding in three institutions o first crowding in the family reduces the attention and energy parents can devote to their children, which in turn delays development and achievement of children o second, crowding in educational institutions reduces learning opportunities and attainment of students in large cohorts.. as human and physical capital in school systems cannot keep pace with the surge in population size, the quality of teachers and of the curriculum declines o third, labour market institutions cannot easily absorb the large number of potential workers - the problems faced by large cohorts in each institutional stage of the early life cycle tend to accumulate: Family crowding exacerbates poor educational performance, educational crowding reduces the skills students can bring into the labour force and labour market crowding limits job opportunities - together, limited family, educational, and labour market resources of large cohorts contribute to o high job competition, o low wages, slow promotion, and low income potential - the economic costs last throughout the life cycle, requiring adaptive behavior even well in retirement - cycles in relative economic status shape a wide variety of outcomes. Low fertilize represents an adaptation to low relative income: o in order to maintain consumption standards similar to those they were raised with, couples limit their childbearing and the expenses associated with children ] working wives, delayed marriage and later ages of childbearing represent other adaptations - further with lower relative income men less willingly take on economic responsibilities of a family, and this hesitation results in high rates of abortion, illegitimate births and divorce - these adaptations tend to modify the economic impact of relative cohort size upon the couple, but increase the demographic impact of a cohort’s low relative income - altered demographic behavior has been the key to transforming adverse labour market conditions into favourable living conditions - with these adaptations, however, men in large cohorts may feel stress and disappointment because they cannot fulfill traditional roles o the sacrifice of family life to maintain economic status likely induces stress, which results into social malaise, crime, suicide and alienation - in contrast, members of small cohorts do not face the same conflict between resources and aspirations; their high relative income allows them to meet their consumption aspirations even while marrying early, having many children and maintaining traditional roles - easterlin agrees that higher rates of labour force participation among women in large cohorts do moderate swings in relative income, but he believes they have no eliminated the importance of the cycles altogether - easterlin’s arguments about relative income, particularly as they relate to the differential contribution of male and female work to family finances, assume that employers find younger and older male workers poor substitutes for one another but treat younger and older woman as adequate substitutes o younger and older women more often compete for the same jobs –they can serve as adequate substitutes for each other. Female labour force participation rises among older women when a shortage of younger women exists and female labour force participation rises among younger women when a shortage of older women exists. Thus, given the traditional division of labour between men and women in the us, cohort size as a determinant of economic fotune applies primarily to the experience of men - easterlin suggests that cohort effects hold more for a nation such as the US than for European nations with older and or generous welfare states - the Easterlin effect should emerge among high income countries during periods of relative economic stability and restrained immigration such as after world war II, particularly among those few high income nations like the US or Canada without strong institutions of collective social protection Theoretical Importance of Easterlin Effect - easterlin addresses issues of causal ordering by distinguishing between ex ante and ex post income - ex ante relative income refers to the status of young adults in the absence of any adjustment to market forces, while ex post income includes behavioural adjustments to raise income - despite low ex ante income, baby boomers actually increased their ex post income through increases in wives’ participation in the work force and a reduction of the number of children - he argues that cohort size changes the likelihood of certain age specific behaviours, and this makes arguments of behavior change inherently dynamic - the argument notes that high income alone may not lead high fertility if the expected standard of living remains even higher. Conversely, low income may lead to high fertility if it nonetheless exceeds low expectations - relative income comes from the comparison of resources to socially induced tastes or aspirations and socially induced aspirations stem from childhood economic socialization and experiences - a cohort’s taste preferences, formed during adolescence, reflect parental income and persist well into later life, esp. into periods of family formation Labour Market Experience and Education Wages - welch and smith argue most strongly that members of large cohorts overcome initially low wages with faster wage growth as the labour force slowly absorbs the large cohort and as individuals make choices about investments in human capital in an attempt to mitigate the negative consequences of belonging to a large cohort - another issue concerns which groups within large cohorts face the greatest income loss. Several of the studies demonstrate greater loss among more highly educated persons - more consistent with the logic of easterlin effect, some recent evidence shows that wages of young workers with a college degree increased during the 1980’s consistent with the decreased supply of those workers - thus changes in the supply of male workers could explain the pattern of wages prior to 1980, but a change in the structure of labor demand –in particular an increase in the demand for more educated workers –better explains wage patterns after 1980 - in addition to relative cohort size, earnings respond to whether workers belong to the leading or trailing edge of the baby boom. The leading edge members must endure economic problems longer until labour market conditions improve. Similarly, recent small cohorts must wait for the bottleneck of the trialing edge of the baby boom generation to work itself out. Although members of the baby bust generation haven’t yet benefited from their small cohort size, favorable evidence should emerge in near future if the relative cohort size argument holds. If, however, demand factors outweigh supply factors, the increase in demand for highly educated workers outweigh supply factors, the increase in demand for highly educated workers will continue to depress the wages of less educated younger workers - lower earnings decrease the opportunity cost (make it cheaper) for workers to invest in human capital. This increased investment raises future earnings and allows members of large cohorts to catch up to the earning levels of small cohorts Female Employment - membership in a small cohort and high male relative income encourage family decisions that favour childbearing and homemaking over employment for the wife - low male relative income and adverse male labour market experiences promote female labour force participation as a means of maintaining consumption desires - given the traditional sexual division labour in the family, easterlin claims the work of wives remains secondary to that of husbands - employment of young women stayed low in the 1950’s despite many job opportunities, but then rose during the 1960’s/ the opposite pattern emerged for older women: their participation rose most in the 1950’s when participation for young women declined. These changes correspond closely to changes in male relative income. - More permanent changes in female labour force attachment were in part induced by the baby boom
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